Published 4:00 am, Friday, March 1, 1996

1996-03-01 04:00:00 PDT Sacramento -- A state agency has granted $4.6 million in tax credits to a nonprofit housing agency whose chief developer is a Monterey accountant facing four counts of grand theft, The Chronicle has learned.

The attorney general's office said developer Donald Ozenbaugh, who once served as an accountant to former U.S. House majority whip Tony Coelho, D-Merced, lied on loan documents about court judgments and bankruptcies in his financial history.

A grand theft criminal complaint filed by the state against Ozenbaugh in November said he "willfully, unlawfully and feloniously" failed to report his true financial status on real estate loan documents in 1988.

The committee grants tax credits as an incentive for investors to put money into low-income housing projects.

In recent months, Salinas-area critics have raised questions with the committee about the need for and location of a housing project in King City -- and about the $50,000 fee Ozenbaugh is being paid to broker the deal.

The tax credit committee is investigating those complaints. But the disclosure of the criminal complaint stemming from the 1988 loan provided further grist for investigators.

"The tax credit committee is very concerned about these allegations of misconduct by a key member of CHISPA's staff -- particularly when we are currently investigating CHISPA for potential misrepresentations in their application for tax credits for the . . . project in King City," said Don Maddy, the committee's executive director.

The committee will be taking action on the King City complaints "in the near future after we sort the facts out," Maddy said, "and it could lead to denying the housing agency's future participation in the (tax-credit) program for up to a year."

Maddy said that applications for the tax credits must include disclosure forms by developers of low-income housing. On the application for the King City project and other projects, Ozenbaugh said his accountancy business had never been part of any default or foreclosure.

The committee would not have learned of his past financial problems because such personal financial information is not required in the application for the tax credit.

According to the Department of Justice complaint and an investigator's statement filed in court in Merced, the 1988 problems stemmed from Ozenbaugh's request for real estate loans of more than $1 million. He failed to tell the loan company that he had past court judgments, bankruptcies and property foreclosures, court records allege.

State agents opened an investigation in September when a Santa Cruz loan officer provided documents which he said showed his firm was a victim of a "fraudulent loan scheme" by Ozenbaugh, according to court documents.

Department of Justice investigator Ken Beckstead says in court documents that Ozenbaugh had six property foreclosures in the five years preceding the 1988 loan application, had been named in numerous lawsuits and misstated his assets and income.

In one case, Ozenbaugh said he had assets of $1.6 million in Full Udder Inc., which ceased activity in 1992. "The only known assets of Full Udder Inc. were a computer program and a twin-engine airplane, possession of the later subject to dispute," the court documents said.

Tom Harris, who described himself as Ozenbaugh's financial investigator, said Ozenbaugh would "explain each one of these things."

"Their information is wrong," he said of the complaint.

In 1989, it was reported that when Ozenbaugh was an accountant to Coelho, he gave an incomplete and partially inaccurate account of the congressman's 1986 purchase of $100,000 in high-yield junk bonds.

At the time, Coelho said a $50,000 loan from a savings and loan used to buy the bonds was omitted from his financial disclosures statements because of an oversight by Ozenbaugh.